Four Ways I Grow My Money Like the Rich

With eager anticipation, I logged into my new money market account on the first of the month. There sat my emergency fund with a sizable addition- $100 in interest. For the first time in my life, the money I worked for years to save was earning me decent interest every month, and I had to do absolutely nothing.

Looking back, I should have moved my growing emergency fund into a money market account much sooner, but like many, I assumed the logical assumption was to keep savings in a traditional savings account. Besides a life lesson that standard savings accounts don’t come with the perks of other interest-bearing accounts, it dawned on me how easy it is for the rich to stay wealthy. If my modest emergency fund was 100 times higher, I could rake in a six-figure annual income by doing absolutely nothing. Wild, right?

While most of us will never be in the 1%, here are rich-person techniques I use to grow my nest egg more effectively:

Know your money’s purpose, and use the right account for it

Is your money pool for regular bills? An emergency fund? Long-term or short-term savings? Assigning your money to categories will help you pick the right account.  

• For regular bills? Stick with a fee-free checking account.

• Your emergency fund? Open that interest-bearing money market account. Tip: be sure to research the minimum balance requirements and allowed number of monthly withdrawals.

• Your short-term savings for that replacement car, a new couch, or a vacation? Compare Certificate of Deposit (CD) rates or stick with a money market account.

• What about long-term savings, particularly retirement? Set up that automatic transfer to a Roth IRA and let it grow overtime. Tip: if you have an employer-sponsored retirement plan, set your contributions to the maximum that your employer matches. Don’t pass up free money!

Understand your tax bracket

Each year, the IRS updates tax brackets outlining the general amount you’ll pay based on your annual taxable income. While deductions help reduce this (education, dependents, healthcare, etc.), it’s important to understand where you fall on the bracket, and how to be strategic with expenditures and record retention to reduce what the IRS keeps.

Be strategic with debt

Let’s face it, the great majority of us need to take out loans for some of life’s necessities. If your payments are on-time and your current debt isn’t inhibiting other financial goals (like home loan pre-qualification or a good credit score), weigh faster debt repayment versus saving. For instance, I stopped paying extra on my mortgage and split that money between my Roth IRA and my money market account, since the projected return was higher than my mortgage interest rate.

Protect your assets

While insurance costs are a tempting budget item to slash, stick with a reputable insurance company and pay for proper coverage. That monthly bill feels unnecessary until your apartment building has a fire, a storm batters your house, or an animal collides with your car. If unexpectedly replacing a necessity would wreak havoc on your finances and your life, insure it well.

Final thoughts

Tapping into financial management techniques used by the wealthy will boost your financial stability. Even with a modest income, you can grow your nest egg and make your money work for you.